A profit-maximizing firm is deciding whether to hire an additional worker. The worker would generate $600 in additional revenue, and the market wage for the worker is $450. According to marginal analysis, what should the firm do?

### Why this is right Marginal value product and wage are both $500, so the additional income equals the additional wage cost. Equality is the stated stopping point. ### The concept The marginal rule compares the additional benefit and cost of labor. It does not say that any positive output justifies hiring; the worker's added income must be evaluated against the wage. ### The other options - **B. Continue hiring because value is greater than cost**: The values are equal, not greater. - **C. Reject the worker because cost exceeds value**: The values are equal, so cost does not exceed value. - **D. Ignore wages and compare output with total revenue**: The rule specifically compares marginal value product with the wage. ### Worked numbers - **Given**: Marginal value product is $500; wage is $500. - **Find**: The hiring decision under the rule. - **Formula**: Compare marginal value product with wage. - **Solve**: $500 = $500. - **Answer**: Stop hiring at the stated equality point. - **Check**: The worker's added income exactly covers the wage cost. ### Watch out Equality is neither “greater than” nor “less than”; it has its own stopping implication. ### Remember When marginal value product equals the wage, the stated rule says to stop.